Glencore and Rusal Ask LME to Lift Suspension on Trading of Rusal’s Aluminium

Glencore and Rusal Ask LME to Lift Suspension on Trading of Rusal’s Aluminium

Citing the Trump administration’s extension for complying with the sanctions it placed upon U.C. Rusal, Anglo-Swiss mining and trading firm Glencore plc has joined with the Russian miner in petitioning the London Metal Exchange to temporarily lift the suspension on Rusal’s aluminium.

Sources revealed to Reuters on Friday that the request had been made, but were unable to provide any further detail. Glencore and Rusal remained mum on the subject.

The sanctions placed upon Rusal last month prompted the LME to suspend trading of the firm’s metal shortly thereafter, as the LME and its members sought to ensure any and all metal delivered was not under U.S. sanction.

Though the sanctions were initially slated to go into effect in early June, the administration bowed to pressure shortly after and issued General Licence 14 (GL-14), which extended the deadline to October 23, with the proviso that the deal was inked prior to the imposition of sanctions on April 6. Such is the case with the current agreement between Rusal and Glencore, which is for 14.5 million metric tons from 2012 through the end of this year.

“Glencore is a big player in the aluminium market, they want to be able to put Rusal’s metal on LME warrant until October,” an unnamed source opined to Reuters.

“The pressure to lift sanctions is coming from Switzerland, from Glencore and others who buy aluminium from Rusal, they want the LME to review the suspension, lift it and bring it into line with the extension.”

“The LME understands there are concerns in the market about how it could be established that metal was GL-14 compliant,” commented a spokesperson for the LME.

“Unless or until a process could be implemented that would give sufficient comfort for the market as to GL-14 compliance — including that any post-designation metal was supplied under pre-designation contracts — the temporary conditional suspension will remain in effect.”

Although determining whether a specific ingot was smelted prior to the sanctions’ imposition is easy enough, sources who spoke to Reuters noted the difficulty in determining whether it complied with GL-14, as such a determination of the terms of the original agreement and the amounts involved.

“There would be a lot of work involved in making sure metal delivered to the LME isn’t under sanction,” explained a commodity trader to Reuters.

“They (the LME) will be talking to lawyers, regulators, members and probably the (British) government. It would be dangerous for the LME to make a unilateral decision.”